Financial Management
a847165977
BUS530TestNumber1.docxBUS 530 Test Number 1
Instructions:
1. After you are done, submit your answers to Blackboard. Please submit it as a solution to the assignment.
2. Attempt all the parts on the assignment.
3. Show all work for credit. When using the calculator, type what you enter in each button. This will get you partial credit if the final answer is not correct.
4. A grade of zero will be assigned to all essay questions without a proper citation for all sources of information.
Best of luck on the test.
Student name:
Useful Formulae BUS 530
and
How does a portfolio reduce risk?
Use the following information for Questions 2 and 3.
|
Securities in vested in the portfolio |
||||
|
Security |
Investment amount |
|
Expected return |
Standard deviation |
|
A |
$375 |
1.2 |
17% |
12% |
|
B |
$550 |
1 |
15% |
8% |
|
|
Part 2. (Show all work for credit)
What are the expected return and of the portfolio?
Part 3. (Show all work for credit)
What is the standard deviation of the portfolio?
Part 4. (Show all work for credit)
Use the following information to calculate the required return on a company’s stock. The company has a of 1.2 and the 90-day Treasury Bill rate is 2%. The stock price is $32, next year’s dividends are expected to be $2.5 per share, and the stock is expected to grow at a rate of 3% annually.
Part 5. (Show all work for credit)
Part a. Ellen now has $125. How much would she have after 8 years if she leaves it invested at 8.5% with annual compounding?
Part b. You have just purchased a U.S. Treasury bond for $747.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for $1,000. What interest rate will you earn on this bond?
Part 6. (Show all work for credit)
Part a. What's the present value of a 4-year ordinary annuity of $2,250 per year plus an additional $3,000 at the end of Year 4 if the interest rate is 5%?
Part b. Suppose you borrowed $12,000 at a rate of 9.0% and must repay it in 4 equal installments at the end of each of the next 4 years. How large would your payments be?
Part 7. (Show all work for credit)
What is the difference between a bond’s coupon rate and its yield to maturity?
Part 8. (Show all work for credit)
What is the price of a bond that pays a semiannual coupon rate of 8%? The bond matures in 20 years, has a yield to maturity equal to 7%, and has a face value of $1,000.
Part 9. (Show all work for credit)
What would the stock price be for a company that just paid $2.35 dividends per share? The required return on the stock is 12% and the dividends are expected to grow at a constant 3% for the future.
Part 10. (Show all work for credit)
Given the following financial statements, what are the additional funds needed to pay for a growth rate of 15%? The assets are currently utilized at 95% of capacity. The fixed assets can only increase by increments of $27,000,000.
|
Income Statement |
|
|
|
|
|
All numbers in thousands |
|
|
|
|
|
Revenue |
31-Dec-17 |
|
|
|
|
|
|
|
|
|
|
Total Revenue |
160,043,000 |
|
|
|
|
COGS |
140,436,000 |
|
|
|
|
SG&A |
11,527,000 |
|
|
|
|
Depreciation |
3,267,000 |
|
|
|
|
EBIT |
4,813,000 |
|
|
|
|
Interest Expense |
1,133,000 |
|
|
|
|
Income Before Tax |
3,680,000 |
|
|
|
|
Income Tax Expense |
520,000 |
|
|
|
|
Net Income |
3,160,000 |
|
|
|
|
|
|
|
|
|
|
Dividends |
1,580,000 |
|
|
|
|
Add. to Retained Earnings |
1,580,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet |
|
|
|
|
|
All numbers in thousands |
|
|
|
|
|
Period Ending |
31-Dec-17 |
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
Current Liabilities |
|
|
Cash |
28,709,500 |
|
Accounts Payable |
23,282,000 |
|
Accounts Receivables |
73,026,500 |
|
Note Payable |
51,621,000 |
|
Inventory |
14,166,000 |
|
Accruals |
19,697,000 |
|
Total Current Assets |
115,902,000 |
|
Total Current Liabilities |
94,600,000 |
|
|
|
|
Long Term Debt |
128,220,000 |
|
|
|
|
Common Stock |
41,000 |
|
|
|
|
Retained Earnings |
34,947,000 |
|
PP&E |
141,906,000 |
|
Total Stockholder Equity |
34,988,000 |
|
Total Assets |
257,808,000 |
|
Total Assets |
257,808,000 |
